EXPLAINED: BSE tests negative crude oil prices on commex; here’s how it will work

The Bombay Stock Exchange has introduced trading in negative prices for crude oil on its commodities derivative segment Commex. BSE on Tuesday changed its trading platforms in a manner to accommodate negative prices of crude oil. The move comes weeks after April crude oil futures fell to a negative $37.63 per barrel. The sharp fall in crude oil futures forced MCX, the country’s largest commodity bourse, to settle April crude contracts at a negative Rs 2,884 per barrel, resulting in many brokerages seeking legal remedies to the negative pricing done by MCX. Most of the trading in crude oil in India happens on the MCX platform.

BSE said that after testing of the platforms to accommodate negative pricing, the feature will be made available to traders. The simulation or testing of the revised pricing mechanism will start from May 4, 2020. Once the system is available to trading partners, the Brent crude futures contracts offered by BSE can be traded in negative if the benchmark falls to such prices. So far, the Brent crude, unlike WTI crude, has not fallen into the negative territory.